DETECTION AND PREVENTION OF FINANCIAL FRAUD IN NIGERIA BANKS

1.0 INTRODUCTION

1.1 BACKGROUND OF STUDY 

There has been no single accepted definition of the term “fraud”. Fraud in whatever forms are limitless on classification. This is why courts and writers on fraud shirk or try to escape away from giving a decisive definition. Notwithstanding, the varied meaning attached to the concept of financial fraud, the author addressed the subject with the following working definitions. Oxford and chamber dictionaries define fraud as criminal deception, acts of deceptive trick, cheating, swindling person or thing that decodes. Longman dictionary defines fraud as “an act of deceitful behavior for gain which may be punishable by law”. In the mind of the civil court of justice, fraud may be said to cover all acts, omission, and concealments which involve a breach of legal or equitable duty, trust, or confidence, justly reposed and injurious to another, or by which an under influence or advantage is taken off. Bunmi Fagbenmi defines banking fraud to mean an act or cause of deception deliberately practiced to gain an unlawful or unfair advantage, such deception directed to the detriment of another. He goes further to define fraud to mean depriving a person dishonestly of something which his own. Having closely studied these approaches to the definition of fraud especially from the banking perspective one may correctly see bank financial fraud as a deliberate act by an individual or group within or without the Nigerian banking system to cheat swindle, deceives, or manipulate to dispose of their funds. Therefore fraud and forgeries in banking transactions can be perpetrated through falsification of entries in account of customers to take advantage of the excess processing. Despite several definitions of fraud, the author believes that the ones so far given are rather appropriate, adequate, and inspiring for the purpose in which the research work intends to achieve. This is because. They contain the basic elements of fraud which include that:- (a) There must be deceit or deception directed to the detriment of another or entity. (b) A false representation has been made knowingly or without belief in its truth or recklessly, carelessly, whether it be true or false. (c) To obtain damages for deceit, it must be proved that the defendant intended that the plaintiff should act on it and suffered damages in consequence. The position of the banking system in our economy cannot be over-emphasized. They act as the “conduct pipe: through which all the financial transactions pass. However, fraud has proved a serious bottleneck to the proper functioning of the roles of the banking system to the Nigerian economy. People are beginning to get worried and sooner than later may lose confidence in our banking sector due to mainly the very increasing incidence of fraud in our today’s banks. Banks as the storehouse of the public funds and properties should be on trust, not fraud.

1.2 STATEMENT OF PROBLEM

The frequent case of financial fraud in many financial institutions in our country is now taken as the utmost concern to financial experts and micro economists. This has also initiated the task of seeking solutions to eliminate its occurrences. To some banking experts, the issue of fraud is an internal vice in the Nigerian banking system. They argue on this because a good number of frauds occur among our banks without the knowledge of outsiders even where the public is aware it does not affect the rate at which customers withdraw or deposit money. These experts are inclined to believe this because the nation is underbanked, the populace is at no option but to use the available banks like especially the foremost and well-established bank like UBS PLC even if there are glaring inefficiencies in the operation incompetence and laziness among most banks staff give birth to fraud. Fraud has paralyzed the roof, the foundation, and the credibility of our banking system. Just pick up any national daily or from police record and you will be alarmed at the extent and magnitudes of bank fraud in Nigeria’s banking system. Many banks have gone in distress. Therefore the researcher is aiming at finding out if there is any significant effect or solution to financial fraud in Nigeria banking system which has to offer to these deficiencies aforementioned with special reference with UBA PLC station road, Enugu. In summary, the major problems of this study are as follows:- (a) The incessant/consistent cases of financial fraud. (b) Inleakness has been attributed to the banking industry before the introduction of effective control of financial fraud. 1.3

1.2 PURPOSE/OBJECTIVE OF THE STUDY 

This research work is generally set towards ascertaining the effects financial fraud has had on the Nigerian banking system or banking industry since its inception in the Nigerian industry. Furthermore, the study is:- (i) To determine if most of the bills the banking have in relationship with the financial fraud in banks and to what extent. (ii) To examine the facts contained in the detection and prevention of financial fraud issues. (iii) To research into the reasons why people are involved in financial fraud. (iv) To examine the various management and government controlling devices geared towards eliminating or checking financial fraud in our banking system. (v) To diagnose the banking procedures to fish out loopholes inherent therein and suggest ways of plugging them. (vi) To recommend solutions that may help in checking financial fraud in our banking system. (vii) To identify the problems banks face as a result of the introduction of financial fraud.

1.4 SIGNIFICANCE OF THE STUDY

This study is intended to highlight the indispensable position of an auditor and those concerned to work in an available financial house like banks. This project will equally be of immense help to other establishments and organizations both in the public and private sectors. The dive need to establish a viable internal audit unit as a means of internal control should not be over-emphasized. It is hoped that the management of UBA PLC Station Road, Enugu, in particular, should use the audit department (i.e. audit department and inspection). This department being the watchdog of banks should be given more teeth to bite than more banking prospective investors, promoters, shareholders would find this study very useful. This will serve as an eye-opener to them on want it takes to invest in banks. This will also help readers and those who may wish to make references on the topic of study may be while undertaking similar research work. Government agencies can install adequate internal control measures to avert the incessant frauds and embezzlement rampant in financial houses ministries and parastatals today. They should be able to understand what is fraud and where to audit how and why auditing and internal control system is invertible ambient of the business system.

1.5 LIMITATIONS OF THE STUDY 

This research work on detection and prevention of financial fraud is with a particular reference, for the banks to adopt some control measures to check the high incidence of fraud facing them in their operations. The following measure may be of help to the banks in fraud minimization. They should adopt constant and consistent inspections of bank operations. These inspections should be carried out by qualified and experienced bank inspectors and auditors.